Despite regulatory and reimbursement challenges to its erythropoietin stimulating agent (ESA) franchise, Amgen Inc. beat analyst estimates for earnings in the fourth quarter of 2007.

Thanks to higher than expected product sales, the company reported adjusted fourth quarter net income of $1.09 billion, up 3 percent from $1.06 billion in the fourth quarter of 2006. Adjusted fourth-quarter earnings of $1 per share beat analyst estimates of $0.97 per share and represented an 11 percent increase over earnings of $0.90 in the same period last year.

During a conference call, Amgen Chairman and CEO Kevin Sharer said the past year "stands out as the toughest we've ever faced." Yet the company still managed to report full year adjusted net income of $4.8 billion and adjusted earnings of $4.29 per share. Those earnings would have beat the October projected guidance of $4.13 to $4.23 per share, but earlier this month Amgen raised its 2007 guidance to $4.30 to $4.50 per share, resulting in a narrow miss for the year.

GAAP fourth quarter earnings were $835 million, or $0.76 per share. GAAP full year earnings were $3.17 billion, or $2.82 per share. Amgen said the GAAP numbers were negatively impacted by costs associated with its acquisitions of Abgenix Inc., Avidia Inc., Ilypsa Inc. and Alantos Pharmaceuticals Inc. as well as restructuring charges. (See BioWorld Today, Dec. 15, 2005, Oct. 2, 2006, June 6, 2007 and June 7, 2007.)

Fourth-quarter earnings were driven by product sales of $3.62 billion, which were lower than the $3.74 billion seen in the fourth quarter last year but still beat analyst estimates of $3.44 billion. Full year product sales generated $14.3 billion, up 3 percent from $13.86 billion last year.

The ESA franchise took a negative toll on overall product sales in 2007 as labeling and reimbursement changes prompted physicians to alter their prescribing practices and biosimilars entered overseas markets. Worldwide Aranesp (darbepoetin alfa) sales were $827 million for the fourth quarter and $3.61 billion for the year, representing declines of 25 percent and 12 percent over the same periods in 2006. Similarly, Epogen (epoetin alfa) sales were $638 million in the fourth quarter and $2.49 billion for the year, declining 3 percent and 1 percent over the same periods in 2006.

Yet analysts saw a bright spot in the fact that both Aranesp and Epogen fourth-quarter sales actually increased over the third quarter of 2007, possibly indicating that the "ESA franchise is stabilizing," according to Jefferies & Co. Inc. analyst Adam Walsh. Yet Walsh wrote in a research note that ESA and other product inventory levels were high and could have inflated sales.

Analysts also remained cautious ahead of the March meeting of the FDA's Oncologic Drugs Advisory Committee (ODAC), which could result in more ESA label restrictions. Christopher Raymond of Robert W. Baird & Co. wrote that a "worst-case scenario could result in a label carve-out of breast cancer," which he projects drives about 5 percent to 6 percent of worldwide Aranesp revenue.

Outside the ESA franchise, Amgen reported increased price and demand that led to higher fourth-quarter and full year sales of Neulasta (pegfilgrastim), Neupogen (filgrastim), Enbrel (etanercept) and Sensipar (cinacalcet HCl). The chemotherapy-associated infection fighters Neulasta and Neupogen brought in $1.12 billion for the fourth quarter and $4.28 billion for the full year, up 9 percent over the fourth quarter and full year in 2006. North American sales of autoimmune disease drug Enbrel brought in $856 million in the fourth quarter and $3.23 billion for the full year, up 8 percent and 12 percent over the same periods in 2006. And secondary hyperparathyroidism drug Sensipar brought in $128 million in the fourth quarter and $463 million for the year, up 31 percent and 44 percent over the prior year.

The anti-EGFR antibody Vectibix (panitumumab), approved for colorectal cancer in 2006, saw sales decline for the fourth consecutive quarter. The product generated $33 million in the fourth quarter of 2007 and $170 million for the full year. The failure of a combo study with Avastin (bevacizumab, Genentech Inc.) earlier this year hurt the drug, but Amgen executive vice president of global commercial operations, George Morrow, said revenue and share declines "appear to have stabilized during the fourth quarter."

Looking forward to 2008, Amgen projected adjusted earnings of $4 to $4.30 per share, in line with 2007 actual results. Revenue for 2008 is projected at $14.2 million to $14.6 million, down slightly from the $14.77 billion seen in 2007.

Analysts will be keeping a close eye on additional labeling, reimbursement and biosimilar challenges to the ESA franchise, labeling changes and competition that could affect Enbrel, and the potential for Vectibix label expansions. Amgen's value in 2008 also could be influenced by a March FDA advisory panel meeting for Nplate (AMG 531) in idiopathic thrombocytopenic purpura.

Also high on the radar of up-and-coming drugs is denosumab for osteoporosis and cancer treatment-induced bone loss. Amgen reported data last week from a nonpivotal, double-blind, head-to-head trial showing that twice-yearly denosumab resulted in a 40 percent greater improvement in bone mineral density than weekly Fosamax (alendronate, Merck & Co. Inc.). Additional Phase III data are expected in 2008.

Shares of Amgen (NASDAQ:AMGN) rose $2.02 to close at $48.14 on Friday.